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What are the SIZES of new construction single family homes being sold in Harrisonburg and Rockingham County? |
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Over the past 18 months (January 1, 2007 through June 30, 2008) 138 single family homes have been built and sold in Harrisonburg and Rockingham County, as reflected in the HRAR MLS. The sizes of new construction homes that are selling might be of interest to home buyers, home sellers, builders and developers... Click on the graph above for a printable PDF. | |
What are the PRICES of new construction single family homes being sold in Harrisonburg and Rockingham County? |
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Over the past 18 months (January 1, 2007 through June 30, 2008) 138 single family homes have been built and sold in Harrisonburg and Rockingham County, as reflected in the HRAR MLS. | |
Please tell me --- are home values in Harrisonburg and Rockingham County DECLINING? |
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In some parts of the country, they definitely are! But since all real estate is local, I'm really more interested in what is happening with home sales prices in Harrisonburg and Rockingham County.
Here's the methodology, for those who are interested: 1. Gain or Loss = Sale Price 2 - Sale Price 1 2. Time Increment (Years) = Sale Date 2 - Sale Date 1 / 365 3. Appreciation Per Year = Gain or Loss / Time Increment 4. Percentage Appreciation Per Year = Appreciation Per Year / Sale Price 1 As you may be able to tell, this isn't an automated report (at all!) -- so I probably won't be reconstructing this analysis too often. I had to sort through all 4,209 home sales and manually match up double sales, etc., etc. Does anyone know an undergraduate statistics student who would like an (unpaid) internship? :) | |
Understand current market value before making an offer! |
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It would seem that many buyers in the market today are hesitating before making an offer because they are unsure of the current and future value of the home they think they want to purchase. | |
Trends in median price per square foot |
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One problem with tracking median home sales prices in a relatively small market is that median home sales prices can easily be swayed if a large number of small (or large) homes sell in a particular month or quarter. To try to account for the size of the home, I decided to take a look at how the median price per square foot has changed over the past six years. This graph has a few irregularities, but overall seems like it might be a reasonably trustworthy indication of how home values are adjusting over time. Do bear in mind that while I have removed the size factor, I have not accounted for some other factors such as age. The first quarter of 2004 showed a sizable decrease in median home sales price --- this could be explained by a large number of older homes selling, or by some other factor that would affect the price per square foot of homes that sold. | |
Another look at median home sales price trends |
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I recently posted a six year trend graph of median home prices, measured each quarter, and concluded that median home sales price analysis is not wildly significant. However, several people mentioned to me that they would be interested to see how the trend lines changed if I broke out single family homes, as compared to townhomes/duplexes/condos. Here's what we get... As you can see, the trend lines aren't wildly different than the trend line that included both data sets together. Also, both trend lines seem to indicate an increase in median sales price. This could either mean that:
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Where have all the buyers gone? |
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Each month I post a graphical representation of Harrisonburg and Rockingham County home sales within the context of the prior five years. (2003-2008) My monthly home sales report includes the data behind this graph, which (in the most recent month) showed a 23% decline in home sales this year as compared to the prior year (Jan-May 2008 versus Jan-May 2007). But, as a friend of mine pointed out, this doesn't show how far the rate of home sales has fallen compared to when our market was at its fastest pace. The graph above illustrates the 38% decline that we have seen in Harrisonburg and Rockingham County between the peak of buyer activity (2005) and the current year (2008). Please do remember, this is a decline in market activity (properties being sold/purchased), not a decline in home values. So where did all of those home buyers go? Why did 364 buyers close on properties during January - May 2008 as opposed to 591 buyers during January - May 2005? I have some ideas...
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Median Home Sales Price Analysis Is Not Wildly Significant |
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In my June 2008 home sales report, I noted that the median sales price of single family homes and townhomes in Harrisonburg and Rockingham County had declined by 3.13% between May 2007 and May 2008. I was a bit surprised to see this, as home values still seem to be increasing in this area. So....I thought I'd take a closer look at median sales price trends....and here's what I found.... This graph charts the median home sales price on a quarter by quarter basis for the past 25 quarters (6.25 years). The data points of the median home sales price are in gray, connected by the green line. You'll see that the median home sales price goes down (quarter to quarter) almost as often as it goes up. We could, thus, conclude that either:
The red trend line may give us a better indication of the changes in home values over time --- though suggesting that significant trend data could rise out of insignificant source data is probably a stretch. Click on the graph to take a closer look. | |
What on earth is this "cap rate" you keep talking about? |
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No --- that's not a cap rate!! Simply put, a "cap rate" is a measure of how quickly your investment is being returned to you. By your "investment" I mean the value of property that you have purchased. by "returned to you" I mean the amount of money that a property generates in a year. The cap rate formula is . . . Net Operating Income / Purchase Price So if you buy a property for $160k, rent it for $975 per month, and have $1,500 of annual expenses, you have a cap rate of 6.375%. ( ( 975 * 12 ) - 1500 ) / 160,000 = 6.375% Care to know more? Read these . . . What Is A "Cap Rate"? Harrisonburg Single-Property Cap Rates Harrisonburg Multi-Family Cap Rates Would you like help calculating the cap rate on a property you own, or are considering purchasing? Call me (540-578-0102) or e-mail me (scott@cbfunkhouser.com). | |
Housing Supply & Demand - May 2008 |
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This is an illustration of the relationship between our market's supplyand demand in four price ranges. The numbers (6, 11, 14, 25) representthe months of supply of properties currently available based on averagedemand per month during the past twelve months. This month (May 2008) shows an increase in months supply in all except the lowest price range. The most significant increase was in the $400k+ price range where the months of supply available jumped from 21 months to 25 months. This was largely because of the increased supply of homes --- 152 homes for sale in May as opposed to only 137 in April. | |
April 2008 Home Sales In A Historical Context |
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This month's sales (April 2008) were a bit of a surprise to me. Throughout March and April I have heard about a LOT of homes that have gone under contract. I had thought we would start to see that show up in April closings, but perhaps it won't be until May or June. It is fascinating to me to see how closely most years follow the same month-to-month trend lines. The black (hollow) circle at the end of the purple line shows the 78 home sales that took place in April 2008. We saw the same April dip this year (compared to March) as we saw in 2003, 2006 and 2007. Perhaps that is because 2004 and 2005 were the years that really bucked the trends as home sales skyrocketed. Whatever the reason, home sales continue to trend as they have over the course of the past several years. Sales are happening at a slower level as compared to 2004, 2005, 2006 and 2007 --- but March and April of this year (2008) showed sales counts higher than in 2003. | |
Harrisonburg / Rockingham County Home Sales Report - May 2008 |
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Some observations:
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Harrisonburg Single-Property Cap Rates |
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Cap rates vary over time, as market conditions change. Here is a brief analysis of current cap rates for single properties in the Harrisonburg area as of May 2008. | |
Harrisonburg Multi-Family Cap Rates |
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Multi-family properties often provide different cap rates than single properties. Let's take a look at some recent multi-family sales in Harrisonburg . . . 1710 Park Road, Harrisonburg = 5.1% 1986 Brick quad Sold for $400,000 in February 2008 ( ($2030 per month x 12 months) - ( $1023 insurance + $2002 taxes + $1,000 repairs ) ) / $400,000 sale price 325 Colicello Street, Harrisonburg = 10.6% 1919 triplex Sold for $184,500 in April 2008 ( ($21600 per year) - ( $658 insurance + $678 taxes + $750 repairs ) ) / $184,500 000 sale price 331 Grace Street, Harrisonburg = 3.4% Duplex Sold for $282,000 in September 2007 ( ($1040 per month x 12 months) - ( $720 insurance + $1538 taxes + $500 repairs ) ) / $282,500 sale price As you can see, in multi-family properties, the cap rate is not as predictable as in singe family rental property. Related Posts: Harrisonburg Single-Property Cap Rates What Is A Cap Rate? | |
What Is A "Cap Rate"? |
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The "cap rate" or capitalization rate of a property is what I call an an "investment measure." It is a value that compares the income generated with the acquisition cost of an investment.
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Are CMA's Just For Sellers? |
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Not at all! They are for buyers as well! First, a CMA is a comparative (or "competitive", depending on who you ask) market analysis --- or, an analysis that compares one property (the "subject property") to other similar properties that have either recently sold, or are on the market. As I explain to my clients, my CMA's attempt to account for all significant aspects and characteristics of a home including square footage, functional space,age, style, condition, and more. Why would a buyer want a CMA? When making a purchase offer, sometimes buyers determine price based on what they think the seller will accept, or what would be a reasonable offer given the asking price. Ignore the asking price! That's not to say that all offers should be low offers trying to "make a deal", but consider these two examples:
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Should High Gas Costs Drive Buyer Behavior? |
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This was an interesting question posed by a friend a few weeks ago, and we took some time to do some rough analysis, which seemed to indicate NO. Here's the logic: Historically, some people who work in Harrisonburg have chosen to live outside of Harrisonburg where housing is somewhat more affordable. Two classic examples of this are Weyers Cave (14.4 miles away) and Broadway (12.9 miles away). Both Weyers Cave and Broadway have offered home buyers housing at somewhat lower prices, within a reasonable commute to Harrisonburg. But with gas costs going higher and higher, could (or should) this buyer behavior change? The distances above (14.4m, 12.9m) were city-center to town-center. We'll round up, and say the one-way commute for a fictitious commuter is 15 miles. We'll assume a somewhat gas-hungry vehicle that will drive 20 miles per gallon of gas. With current (4/29/2008) gas costs around $3.60, the one-way commute has a gas cost of $2.70. Driving both ways to and from work, 5 days a week, 50 weeks a year, equates to an annual cost of $1,350. If someone lived in Harrisonburg instead (and still worked in Harrisonburg), their commute might be 3 miles, which would equate to an annual cost of $270. Thus, the cost savings in gas consumption (relative to the work commute) of living in Harrisonburg instead of Broadway or Weyers Cave is approximately $1,080 per year. That $1,080 per year, or $90 per month, if used to allow the home owner to afford a larger mortgage payment, would allow for a home purchase of $13,500 greater. That is to say that a $200,000 home ($40k down, 6% rate) would have an $1,100 monthly payment, and a $213,500 home ($40k down, 6% rate) would have an $1,190 monthly payment. So, the question then becomes, does a $200,000 home in Broadway or Weyers Cave cost $213,500 in Harrisonburg, or more, or less? Broadway: 4 bedrooms, 2.5 bathrooms, 1517 SF, circa 2007, garage, $199,900 http://60755.scottprogers.com Weyers Cave: 4 bedrooms, 2 bathrooms, 1584 SF, circa 2003, $199,000 http://64154.scottprogers.com Harrisonburg: 3 bedrooms, 2.5 bathrooms, 1360 SF, circa 2002, garage, $214,900 http://62949.scottprogers.com Though the data in my example is limited, it seems that even accounting for the commuting cost of living in Broadway or Weyers Cave, you can still buy a (somewhat) larger, (somewhat) newer house in those communities as opposed to Harrisonburg. | |
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Scott Rogers
Funkhouser Real
Estate Group
540-578-0102
scott@funkhousergroup.com
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Commonwealth of Virginia
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